ASSERTIVE INFRASTRUCTURE PVT. LTD.,DELHI vs. ITO WARD 3(3), NEW DELHI

ITA 4200/DEL/2025Status: DisposedITAT Delhi21 January 2026AY 2014-1519 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the assessee follows the Percentage of Completion Method (POCM) for revenue recognition, as advised by ICAI. It was observed that the assessee computed its income on POCM in subsequent Assessment Years (AY 2016-17 onwards), adjusting the non-refundable security against revenue and paying taxes. These returns were accepted under scrutiny assessment u/s 143(3) without additions. Therefore, making an addition for the same amount in the current year amounts to double addition. However, the Tribunal could not verify from the financial statements whether the entire non-refundable security was adjusted. Accordingly, the AO was directed to verify this fact and, if any portion remained unadjusted, to treat that portion as income for the year under appeal. Regarding the applicability of Section 194-IA, the Tribunal found that the payment of INR 69 crores to LBPPL was made on 09.04.2013, prior to the insertion of Section 194-IA w.e.f. 01.06.2013, making it not applicable. Consequently, no disallowance could be made under Section 40(a)(ia) for non-deduction of TDS under Section 194-IA, as the amendment to Section 40(a)(ia) including Section 194-IA was applicable from AY 2015-16 onwards. Thus, the grounds of appeal were partly allowed.

What were the facts?

The assessee, M/s. Assertive Infrastructure Pvt. Ltd., engaged in real estate development, filed its return of income declaring NIL for Assessment Year 2014-15. The Assessing Officer (AO) assessed the income at INR 68,98,66,120/-. The assessee had entered into a development agreement with ATS Housing Pvt. Ltd. and received INR 69 crores as non-refundable security. The assessee also entered into a sub-lease agreement with Logix Builders and Promoters Pvt. Ltd. (LBPPL) and paid INR 69 crores to them for development rights. The AO treated the INR 69 crores received from ATS Housing Pvt. Ltd. as revenue. The assessee's appeal to the Ld. Commissioner of Income Tax (Appeals) [CIT(A)] was dismissed. The assessee is now before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the Ld. CIT(A) erred in confirming the addition of Rs. 69,00,00,000/- made by the AO on account of non-refundable security deposit received from ATS Housing Private Limited, treating it as revenue receipts chargeable to tax in AY 2014-15, contrary to the assessee's contention of revenue recognition as per the Percentage of Completion Method (POCM) under Accounting Standard-7 and Guidance Note on Accounting of Real Estate Transactions, and that it was recognized as revenue in AY 2016-17. 2. Whether the Ld. CIT(A) erred in ignoring the assessee's alternative contention that the AO failed to allow the cost incurred by the assessee as an expense while treating the amount as revenue receipts. 3. Whether the Ld. CIT(A) erred in confirming the AO's action holding the assessee liable to deduct TDS under section 194-IA while making payment to Logix Builders and Promoters Private Limited, and consequently, erred in confirming the disallowance under section 40(a)(ia). Assessee's Contentions: - The non-refundable security deposit is not revenue for AY 2014-15 as revenue is recognized as per POCM, and it was adjusted against gross receipts and taxed in AY 2016-17 onwards, with assessments accepted under section 143(3). - The addition of Rs. 69 crores in the current year amounts to double addition and is contrary to the principle of consistency. - Alternatively, the amount received as non-refundable security was transferred to LBPPL against development rights, making it revenue neutral. - Section 194-IA is not applicable as the transaction was completed before its insertion date (09.04.2013 vs. 01.06.2013). - Section 40(a)(ia) is not applicable as it was amended to include section 194-IA from AY 2015-16 onwards. Revenue's Contentions: - The non-refundable security amount is revenue receipt taxable in the year under appeal, as per the developer agreement. - Alternatively, since the amount was paid to LBPPL against development rights, it forms part of the total cost of acquisition, and since no TDS was made under section 194-IA, the deduction should not be allowed when claimed as cost of acquisition.

Which sections of the Income-tax Act were involved?

Section 250,Section 143(3),Section 7,Section 194-IA,Section 40(a)(ia)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI “A” BENCH: NEW DELHI

Before: SHRI MAHAVIR SINGH & SHRI MANISH AGARWAL

For Appellant: Shri Ved Jain, Adv. &, Shri Ayush Garg, Adv
For Respondent: Shri Jitender Singh, CIT DR
Hearing: 25.11.2025Pronounced: 21.01.2026

PER MANISH AGARWAL, AM :

The present appeal is filed by assessee against the order dated 13.06.2025 passed by Ld. Commissioner of Income Tax (A)-29, New Delhi [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-110242/2017-18 u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment order dated 20.12.2017 passed u/s 143(3) of the Act pertaining to Assessment Year 2014-15. 2. Brief facts of the case are that assessee company is engaged in the business of real estate and has entered into development

agreement with ATS Housing Pvt. Ltd. towards development of project on the land bearing No.SC-1/A at sect

The order continues below.

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